September 2024 Update

Making The News

Fed Cuts support DM

Developed markets continued their rally into September supported by the larger than expected Fed rate cut of 50bps. Fed members revealed that the early signs of a weakening labour market motivated the decisive move to begin the rate cutting cycle.  Concerns regarding the US August core CPI print (+3.2% YoY) remaining sticky were eclipsed by the FED’s larger than expected 50bps rate cut. Although September has historically been the worst month for equities the S&P 500 ended the month in the green (+2.1% MoM), while the US governments 10-year borrowing rate fell slightly to 3.8% following the larger than expected rate cut.

Oil prices retreat while industrial metals

In September, Brent crude oil (-6.8% YTD) experienced a 8.9% decrease month-over-month due to expectations that OPEC+ would taper production cuts later in the year, leading to a potential increase in oil supply and offsetting the escalating conflict in the Middle East. The price of Brent crude oil dropped below $70 per barrel for the first time in nearly four years. On the other hand, industrial metals saw a rally with the Bloomberg Industrial Metals Index increasing by 6% month-over-month, driven by optimism around heightened Chinese economic activity boosting demand for industrial metals.

China Stimulus boosts the corporate bourse

Emerging markets outperformed their DM counterparts by the largest margin YTD of +4.8% (MSCI EM, +6.7% MoM). The outperformance was largely based on the slightly larger than anticipated monetary easing measures with an unexpected launch of stimulus measures ($325bn-plus) that aim to overcome the economies underwhelming growth. In addressing the dwindling Chinese stock prices, the stimulus measures included a $110bn lending facility to support Chinese corporates in purchasing equities. US-listed Chinese corporates were up 30% MoM with notable performances from JD.com (+48% MoM), YUM! China (+33% MoM), and Alibaba (+27% MoM).

South African optimism

After raising the repo rate at 10 consecutive meetings starting in November 2021, the SARB has decided to cut rates by 25bps to 8.0%. The increasing optimism towards SA economic activity paired with the easing global interest rate environment, contributed to the SA government’s 10-year borrowing rate moving towards +10%. Similarly, the Rand strengthened to its strongest level against the greenback in almost two years (R17.26 USD.ZAR +3.2% MoM) due to the SARBs relatively cautious easing approach and the growing optimism surrounding SA. The Chinese stimulus measures also buoyed industrial metal prices, benefitting our domestic diversified miners (+10% MoM). Meanwhile the FTSE/JSE Capped Swix post election rebound continued into September (+16% YTD) and the August headline inflation dipped below the SARBs midpoint (+4.4% YoY).